How to Streamline the Process of Collecting Carrying Charges

This may be the most obvious observation in the world: Members staying current on their carrying charges are essential to the lifeblood of the cooperative corporation. Without them, you are in big trouble. It seems so fundamental, but our office still sees frequent issues, popping up on a daily basis and we thought this was a good opportunity to go over some tips on how to streamline the process.

1. Partial payments: Have a consistent policy on whether you will take partial payments after a Notice has been issued.  We don’t need confusion amongst members as to whether the partial payment has taken them out of the legal process.  We also don’t need a manager making an expectation for one member and not another, as there could be legal consequences for showing disparate treatment of members.  We want to work with members where can, but we need to be consistent.
2. Certified funds: Mandate that once a Notice goes out, only certified funds will be an acceptable manner of payment. Time is money and the cooperative should not have to wait to see if the funds are actually there.  This is at minimum a showing of good faith by the delinquent member that the funds are available and keeps the follow up by management to a minimum. The money is good when it is presented and deposited, without any fear of getting an NSF notice.
3. Make sure delinquent members come into the office and pay in person. How many times have we heard the old phrase “the check is in the mail”?   For Cooperative purposes, the “mail” is usually the dropbox, but you get my point.  I don’t like going to court and having a member tell me, “well I dropped it off in the box.”  That is not always verifiable or credible.  Having the delinquent member go into the office with certified funds and getting a receipt confirming payment will eliminate that issue, since that payment has been verified likely would have resulted in them not even being in court that day because the case would likely have already been dismissed.
4. Accepting Carrying Charges After the Time Provided in the Judgment for Possession: Laws will differ state by state, but in Michigan like many other states, a Cooperative has no obligation to accept payments after the time to pay set forth in the judgment has elapsed.  Every month it seems, we will have Defendant/members trying to pay after the timeframe has expired, and sometimes after we have ordered the bailiff out to execute and dumpsters for their belongings.  Legally, you have no obligation to accept this money because the ship has sailed.  Of course, the Cooperative has every right to make accommodations for payment if they choose to do so, but the court has no authority to require you to accept these payments.  If they do, it is an appealable issue.
5. Be clear and unambiguous when the Court Officer/Bailiff comes to execute: It is customary for the executing officer to contact the management company or the lawyer who ordered the execution to ascertain if the execution is still necessary, or if the delinquent Defendant /member has paid. Saying anything other than the “Defendant has not satisfied the judgment and the writ needs to be executed” can cause issues.  We just had to handle a similar issue where the court officer at the time of execution believed there was some type of a payment plan because he heard some payment had been made.  The manager didn’t tell him to hold off on execution, but because the directive was not clear, the court officer took it upon himself to discontinue the execution process which required additional attorney fees to get the process back on track.
6. Creating habitual non-payment policies. If you are in a state like Michigan which allows a member to ”pay and stay,” meaning if they can come up with the money within 10 days after the judgment is signed, they have cured the balance by satisfying the judgment and can stay.  It costs time and resources for members who are habitually late, or “frequent flyers” as we call them.  Work with your cooperative attorney to adopt a policy that requires any member who is late 3 consecutive times or 4 times in a calendar year to be terminated.  Costs, resources mount when members do not take their obligation seriously.  This policy gives you more leverage on problem members and provides an independent cause of action that they cannot satisfy by paying every time they are taken to court.  It may sound harsh, but in the event the cooperative is not able to recoup all of their fees every time they go to court, those losses add up.  It is not fair the rest of the membership should pay the price for those who don’t live up to their obligations.

Creighton D. Gallup in an experienced Partner with Pentiuk, Couvreur & Kobiljak, P.C. He has drafted proposed legislation exempting housing cooperatives from the Michigan Truth in Renting Act and the Michigan Consumer Protection Act. You may recognize him as Creighton is a frequent instructor at NAHC and MAHC where attendees benefit from his many years’ experience working with management companies and housing cooperative boards.